By Philip LaneNovember 12th, 2014
New paper from Aidan Regan (UCD) here.
By Philip LaneNovember 12th, 2014
New paper from Aidan Regan (UCD) here.
The latest column in the VoxEU series on the economics of World War I is by Steve Broadberry, and is available here.
Yesterday’s Sunday Business Post led with a story that the European Commission has started some “information gathering exercises” into tax arrangements put in place with MNCs in the 1980s and early 1990s. The only company named in the piece is Pepsi.
There is a notable link between Pepsi and Apple. John Sculley was vice-president of Pepsi from 1970 to 1977 and president from 1977 to 1983. He was CEO of Apple from 1983 to 1993. Last week he was in Dublin and gave an interview to RTE’s Science and Technology Correspondent, Will Goodbody. The interview is available on this page and the relevant segment begins at around 08:45. The short transcript and the rest of the post are below the fold.
By Philip LaneNovember 8th, 2014
Patrick Honohan’s speech to MABS event is here.
Jean Claude Trichet’s 19th November 2010 letter to “Tánaiste” Brian Lenihan is here. Brian Lenihan’s reply. It should be remembered that Gavin Sheridan has been to the fore in the efforts to get the Trichet letter published.
UPDATE: ECB page on this is here with lots of related information and material.
By Philip LaneNovember 6th, 2014
Otmar Issing and Ludger Schuknecht explain in this WSJ oped that “Berlin’s pro-growth efforts in the early 2000s saved money rather than require extra spending” – here.
By John CotterNovember 5th, 2014
The Financial Mathematics and Computation Research Cluster (FMC2) are pleased to invite you to attend the following topical talk by René Stulz, a member of our Scientific Advisory Board.
Financial Crises: Lessons Learned and Financial Reform
René M. Stulz, Chair of Banking and Monetary Economics, The Ohio State University
Date: Monday 17 November 2014
Venue: Institute of Banking, 1 North Wall Quay, Dublin1 (inside the Citi Building)
Time: 6:00pm – 7:00pm
Refreshments will be served from 5:30pm.
René M. Stulz Bio:
René M. Stulz is the Everett D. Reese Chair of Banking and Monetary Economics and the Director of the Dice Center for Research in Financial Economics at The Ohio State University. He has also taught at the Massachusetts Institute of Technology (MIT), the University of Chicago, and the University of Rochester.
René M. Stulz was the editor of the Journal of Finance, the leading academic publication in the field of finance, for twelve years. He is on the editorial board of more than ten academic and practitioner journals. He has published more than sixty papers in finance and economics journals. He is the author of a textbook titled Risk Management and Derivatives, a co-author of the Squam Lake Report: Fixing the Financial System, and has edited several books.
The Financial Mathematics Computation Cluster (FMC2) is a collaboration between Industry, University College Dublin, Dublin City University, and NUI Maynooth. FMC2 is a Science Foundation Ireland funded Strategic Research Cluster (SRC). The cluster brings together complementary expertise in financial mathematics, financial economics and computer science to create a multi-disciplinary research programme in asset and risk management, areas that are of critical importance to the present and future development of the international financial services sector in Ireland. For further details see http://www.fmc-cluster.org/
By Philip LaneNovember 4th, 2014
Today is a red-letter day in the development of the euro area, with the ECB taking over responsibility for euro area banking supervision. The new banking supervision website is here.
This ECB working paper is worth going through. The potential output calculation is very important for policy makers, because deviations from the economy’s potential output tend to form a large part of the evaluation of macroeconomic performance used by the European Commission and others. Two recent Central Bank working papers discuss the impact on the Irish economy of these measure. See here and here. The estimates have been, shall we say, fairly far off the mark. The chart below shows this. Understanding the potential output calculation is therefore really important when we talk about policy responses to changes in fiscal policy, especially at the EU level.
There is an interesting New York Times Op-Ed article relevant to the proposed Irish Central Bank LTV and LTI caps on residential mortgages. US financial regulators attempted to impose very similar caps, but the caps have now been diluted/dropped in response to political pressure.
The article is behind the NYTimes paywall, but a number of articles can be read per month without paying a subscription. A key quote:
“low underwriting standards — especially low down payments — drive housing prices up, making them less affordable for low- and moderate-income buyers, while also inducing would-be homeowners to take more risk.”
By Philip LaneOctober 31st, 2014
The purpose of this blog is to provide information/analysis on the Irish economy. While many commenters make valuable contributions, comments should focus on the topics under discussion. Comments on the integrity (broadly defined) of individuals are not tolerated.
Some interesting thoughts (and evidence) from Brian Lucey here.
Worth going through, here are the highlights, download the whole report here (.pdf).
I found the charts on pages 8 and 9 very interesting as well.
The relevant documents published by the ECB are here.
One of the key drivers behind the better-than-expected recovery of the Irish financial sector has been the strong inflow of foreign risk capital, particularly from U.S. “vulture funds” as they are inaptly named. This healthy demand for Irish banking assets has allowed the PCAR and PLAR plans for the domestic banks, and the unwinding of NAMA, to progress successfully. Similarly healthy demand for the Irish assets of foreign banks, such as Irish loan portfolios sold by Ulster Bank, has also contributed indirectly to the Irish financial sector’s partial recovery.
There is a risk capital inflow when a foreign institution buys a troubled loan portfolio or property portfolio from an Irish bank, or from an Irish subsidiary of a foreign bank, or from Nama. These risk capital inflows are not intermediated through the Irish banks and do not appear on their balance sheets. Prof. Brian O’Kelly (DCU) and I were able to trace the 2000-2009 destabilizing inflow and sudden outflow of foreign credit into the Irish banking sector using the aggregate Irish banking sector balance sheet Table A4.1 published by the Irish Central Bank. Question: how can one measure this new source of risk capital inflows? It seems healthy and stabilizing rather than (like in 2000-2009) unhealthy and destabilizing, but it still deserves to be measured accurately. Is it necessary to list all the individual deals and add them up? Has some hardworking analyst done that already? Is it possible to create a quarterly or annual time series? Answers on a postcard (or better on a spreadsheet) are welcome!
By Philip LaneOctober 25th, 2014
The Economic Policy Panel took place over the last couple of days – the draft papers are here. Topics included the impact of fiscal austerity; the role of migration in adjustment; and estimates of the impact of the TTIP.
The Irish Times preview the film with the screenplay writer Colin Murphy and producer John Kelleher here. There is also a short clip from the movie to whet the appetite.
Having seen the Fishamble stage production of Guaranteed! last year I am looking forward to the film version which goes on limited release next week. They probably took some artistic license with the adaption but hopefully not too much.
The 2014 Finance Bill was published yesterday and it is available here with related documents.
There’s not a lot new in the Bill. One of the very minor changes relates to mortgage interest relief, with the relief now available to Income Tax payers in Ireland (who derive the bulk of their income in Ireland) for qualifying loans on PPRs in the entire European Economic Area rather than just Ireland. There are plenty of other minor changes.
On the changes to corporate residency rules announced in the budget The National Law Review in the US has published a useful article under the heading: Death of the “Double Irish Dutch Sandwich”? Not so Fast. re: Irish Incorporated Non-resident Companies. It is available here.
Earlier in the week the Minister for Finance and the Opposition Finance spokespeople gave statements to the Dáil on the pre-budget statement of the Fiscal Advisory Council. The transcripts of these Dáil statements are here.
By Philip LaneOctober 21st, 2014
The Bank of Latvia organised a conference on this topic last Friday: materials here.
The speeches by Coeure and Weidmann on the euro area are quite interesting; I can recommend the presentations on Greece; there were presentations on Ireland by myself and Craig Beaumont.
By Frank BarryOctober 20th, 2014
The ‘Battle of Ideas’ festival held at the Barbican in London last weekend included a panel session entitled ‘Piigs can’t fly: Democracy/Technocracy/Austerity’. I was invited to make a 7-minute presentation of my views as expressed at various crisis conferences over the years:
Back in 1986, long before most people imagined that the single currency would really come into being, Paul Krugman wrote of the potential fiscal co-ordination problem: a bias towards excessive restriction because each country ignores the impact of its actions on the exports of others. “Achieving co-ordination of fiscal policies is probably even harder politically than co-ordination of monetary policies. There is not even temporarily a natural central player whose actions can solve the co-ordination problem. None the less, in surveying the problems of European integration, it is hard to avoid the conclusion that this is the systemic change most needed in the near future”.
Without this problem ever having been addressed, the potential for exchange-rate realignment was locked down. As many US economists warned, the euro was a federalist project lacking in federalist foundations, whether minimalist (banking union or federalist insurance schemes) or maximalist (a Washington-style federal budget).
In the face of this existing (anti-Keynesian?; pre-Keynesian?; antediluvian?) institutional structure, Ireland had no choice but to impose austerity (which would have been required even in the absence of the disastrous bank guarantee of 2008). The large primary budget deficits – which meant that government spending would still far exceed tax revenues even if interest payments ceased – precluded debt default.
The actions of the ECB in 2010 in forcing us to pay off remaining unsecured bank bonds (by threatening to cut off liquidity) appear to have been beyond its mandate and it is difficult to think of any reason not to support economist Colm McCarthy’s call for this to be brought to the ECJ. But, as he notes, the need for retrenchment would have remained.
The Irish experience under austerity has been distinguished by remarkable industrial peace. Paddy Teahon, the chief civil servant behind social partnership, argued that the process had promoted a shared understanding among unions, employers and the government of the key mechanisms and relationships that drive the economy. I wrote back in 2009 that “the Teahon view will be seen to be of validity if some agreement can be reached to reduce public-sector pay until the current crisis is overcome”.
As to whether austerity has worked, it has achieved what it was supposed to achieve, which was to close the deficit and slow the accelerating debt ratio. It was never supposed on its own to get the economy back to work, but rather to position the economy well for when markets rebounded. The flexibility of the labour market makes it easier for Ireland to bounce back from austerity than is the case for Greece for example. So does the openness of the economy, as long as export markets recover.
[All of the other panellists having been hostile to ‘the displacement of democracy by technocracy’, I suggested that:] Many or most economists of my acquaintance in Ireland were content enough with the policies espoused by, and implemented at the behest of, the troika. Technocracy can be viewed as an advantageous buffer between government and – on the other hand – purveyors of snake oil and the representatives of powerful entrenched interests (though technocrats too are not immune, of course, from regulatory capture).
There’s plenty to discuss from yesterday’s announcements but any OP is not likely to be followed by related comments.
All the relevant documents from the Department of Finance are here.
This is a summary of the aggregate budgetary changes (in €million).
Here are two vintages of the debt interest table. First from the April 2013 SPU.
And this from yesterday’s Economic and Fiscal Outlook:
There are lots of opinions I’m sure on how this (temporary?) improvement was used.
Òscar Jordà, Moritz Schularick, and Alan Taylor provide a little historical perspective on banks’ mortgage lending here.
By Liam DelaneyOctober 12th, 2014
The seventh annual one day conference on Economics and Psychology, co-organised by researchers from UCD, ESRI and NUIM, will be held on October 31st in the UCD Geary Institute. The purpose of these sessions is to develop the link between Economics, Psychology and cognate disciplines in Ireland. A special theme of these events is the implications of behavioural economics for public policy though the workshops have covered work across all areas of intersection of Economics and Psychology. Programmes from the previous six events are here. We welcome students, academics, policy-makers, industry representatives and others with an interest in this area. Registration is free of charge but you should sign up on the link below if you are attending. Other questions about the event can be addressed to Liam.Delaney@stir.ac.uk
The programme is available below.
For well over a year now some of us have been pointing out that the Eurozone crisis was entering a very dangerous phase, in which slowly increasing unemployment would eat away at the foundations of Europe’s societies, while short-sighted politicians and excitable journalists proclaimed that the Euro was saved. The invaluable Eurointelligence has been doing a great job recently tracking the apparently inexorable deterioration in the economic fundamentals of the Eurozone, with Germany itself now apparently affected. But for both political and personal reasons I find myself worrying most about France.
Twiddling their thumbs and hoping that something (the economy) will turn up, flawed macroeconomic policy notwithstanding, seems to have been the French government’s master plan up till now. As a result it is hard to see Francois “Say” Hollande, or any other Socialist for that matter, getting through to the second round in 2017.
You may think that Paul Krugman is being too alarmist when he raises the possibility of President Le Pen, and I hope you are right. But Sarokozy’s apparent return to the political fray does worry me. Of course, you may think that if he wins the UMP nomination, the Left will rally round and vote for him when it comes to the second round.
How confident are you about that?
By Liam DelaneyOctober 11th, 2014
A long literature has examined the role of economic factors in promoting well-being. This has been a particularly active area for the last decade or so in Economics (summary of recent workshop we did on this topic with readings etc.,). Lately, a major topic of interest has been the role that mental health plays in producing economic outcomes at individual level. For example, an influential 2011 PNAS paper pointed to dramatic long-run economic effects of early life mental health conditions (see my review paper with one of the authors). Richard Layard has called mental health the new frontier of labour economics and argued for mass expansion of mental health research and treatments. A big focus of the discussion has been the idea that mental health has been systematically discounted compared to physical health conditions in terms of health funding. Various proposals have been put forward to enhance the profile of mental health service in the UK (the recent speech by Nick Clegg one of most prominent).
A few major points to come from this literature and worthy of wide debate in the Irish context include:
The utility losses (for want of a better phrase) of mental health conditions are enormous even outside of effects on productivity and income (e.g. paper here). The interaction of this with physical conditions is also very important. Chronic pain is one particularly important area that should have greater priority in debates on health care (see Alan Krueger on this here).
Childhood mental health has dramatic effects on later life economic outcomes. There is a strong rationale to increase funding for child mental health research and services. Many childhood mental health problems are practically ignored for the purpose of policy-making. For example, there exists almost no evidence on the long-run effects of prescribing stimulants to children diagnosed with ADHD with recent papers not exactly painting a glowing account of their usefulness (e.g. paper by Janet Currie here). If you reflect on it, it really is an odd state of affairs that such important questions are neglected. The role of school mental health services for primary school children and teenagers is another area that is important to debate more given the hugely predictive effect of early mental health on life-long trajectories.
Lord Layard and others have argued for a substantial expansion of talk-therapies and a wider roll-out across society (short article outlining this view here; see also Layard and Clark’s recently released book Thrive). In the context of high rates of unemployment still in Ireland and in particular high rates of youth unemployment, this is worth discussing a lot more in the Irish context. Developing funding streams for large-scale referrals for brief talk-therapies is one of the most concrete suggestions to come from the recent literature.
There is a strong rationale for examining the proportion of health funding allocated to mental health in Ireland. It is widely documented that mental health services in Ireland are given less priority compared to other countries (e.g. recent report here also O’Shea and Kennelly report).
Michael O’Sullivan’s latest Dublin Review of Books piece is here, and it is well worth reading.
By Philip LaneOctober 8th, 2014